The Commerce Commission released a draft determination today stating that, on the information currently available, it would authorise Kiwi Co-operative Dairies Limited to acquire South Island Dairy Co-operative Limited (SIDCO).

Commission Deputy Chairman Mark Berry said that the Commission currently considers the proposal's public benefits to be greater than the detriments it has been able to quantify. To grant an authorisation the Commission must be satisfied that benefits outweigh detriments.

Kiwi has stated that the benefits of the proposal fall into four general groups:

  • preserving competition;
  • more efficient use of joint production facilities;
  • elimination of duplication of some activities; and
  • the SIDCO portion of a combined Kiw/SIDCO would benefit because Kiwi has greater buying power and can acquire some resources more cheaply than SIDCO can.

The Commission has investigated Kiwi's stated benefits and after economic assessment, which is detailed in the draft determination, the Commission's estimate of benefits is that they could be in the order of $6.3 million a year or $8.4 million a year depending on the circumstances.

The Commission stated that, should the proposal go ahead, the detriments likely from the loss of competition between Kiwi and SIDCO were:

  • less efficient allocation of resources;
  • less efficient production; and
  • slower adoption of new technology.

The Commission's estimate of detriments that it has been able to quantify to date is that they could be in the order of $1.4 million a year or $5.6 million a year depending on the circumstances.

Interested parties now have until April 13 to make submissions on the draft determination and experts employed by the interested parties have until April 20 to make their submissions. A conference will be held in Wellington on May 5-6.

The Commission will draw together the information from its investigation, the submissions and the conference to make its final decision by May 26.

Information available from reception at the Commission's Wellington office, level 7 Landcorp House, 101 Lambton Quay:

  • Kiwi's application for authorisation;
  • the Commission's draft determination;
  • Business Acquisitions Guidelines
    • (also on Commission website www.comcom.govt.nz);
  • Guidelines to the Analysis of Public Benefits and Detriments
    • (also on Commission website www.comcom.govt.nz); and
  • Conference Procedures
    • .

Background

The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets. Parties can apply for a clearance, which the Commission will give if it is satisfied that dominance is not acquired or strengthened.

Kiwi has previously applied for a clearance to acquire SIDCO and the Commission declined it because of dominance concerns. Kiwi then applied for an authorisation.

An acquisition that would otherwise be prohibited because of dominance concerns can still be authorised if the Commission is satisfied that public benefits from the proposal outweigh its detriments to competition.

Media contact: Commerce Act Manager Geoff Thorn

Phone work (04) 498 0958

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site www.comcom.govt.nz